Strouds creates a buzz

City of Industry, CA — Compared to April market, when a shroud of uncertainty surrounded Strouds, this market has been a pleasant surprise.

"There's starting to be a positive buzz about Strouds," said Rob Valone, president, and one of the senior management team that purchased the company in April. And it wasn't only because of the declining number of retailers at market.

Besides working its way back from its troubled era, it's now back in the black, having paid income tax last month, said Valone. "We have been profitable on a monthly basis, and will continue to be so."

Valone is confident that Strouds will return to a net profit level comparable to how it performed prior to its IPO.

Strouds has spent the last six months cutting costs and reinventing itself, which includes reducing G&A by nearly 50 percent to approximately $8 million, said a pleased Valone, though he is quick to acknowledge that the specialty retailer is still not where it needs to be.

Valone, along with Gary Van Wagner, vp and cfo, discussed with HTT during market the three areas the specialty retailer has been focused on for the past six months: top-line sales, bottom-line profitability and advertising.

Advertising, for example, is an important facet in the company's brand recognition, and it had to undergo a makeover. "Everything you do is a reflection of who you are — everything has to have the same synergistic approach," Valone said.

Strouds will send direct-mail pieces less frequently than before — once a season instead of six times a year — though Valone hoped to make more of an impression with more pages and a focus on product instead of price.

He sees the catalog campaign as an important part of building the brand. "We believe direct mail is the way to get our core consumer," he said. The database has 2.5 million names, including one million new ones.

The first example of its new approach just shipped — a 24-page direct-mail piece. The catalog focuses on lifestyle with such headlines as "Opposites Attract" and "Elements of Nature." Valone plans to go to a 36- or 48-page book that will be styled like a coffee table book or a catalog, with plenty of cross-coordination of product. "It will have a longer shelf life," he said.

"The advertising is a dedicated effort to change the look and feel of Strouds," he said. "We're relaunching the brand of Strouds."

Its Internet site is also doing well, though Valone stressed that Strouds is a bricks-and-mortar business; thus, the site is treated like a another store, not a vehicle that will exceed store sales.

Expenses have also been looked at closely, including small things like store supplies and shopping bags, said Van Wagner, and Strouds has reduced its SG&A by 50 percent. A lot of additional cost-cutting measures, he said, have been "no-brainers."

Strouds has also reconfigured its merchandise to cut costs. For example, towels were previously merchandised by color, requiring every item to be ticketed. Now towels are separated by manufacturer, with signage listing the prices, eliminating the need to ticket, and saving about $100,000, according to Valone.

The one area Strouds hasn't cut into, however, is payroll — in fact, it has done the opposite. Van Wagner said that associates are expected to give customers five-star service, so he believes putting extra money in the payroll is a wise investment. "We're comfortable that there will be a return on that."

Strouds has also incorporated new policies on items that are not selling. "For three or four years ... we weren't flushing through the losers," said Van Wagner. "We weren't able to turn things over." Now all merchandise has a time line, "so the stores won't get clogged up."

More cross-merchandising is also taking place, and full bath, and bed coordinates, are placed in vignettes.

Van Wagner added that, though fashion bedding draws the customers in, better basics and white goods are the core business of Strouds.

Its vendor matrix is also important, and its support over the last months has helped Strouds achieve better results, Valone said, because of their ability to deliver the right type of product to the Strouds customer.

Van Wagner said that when he worked strictly on the financial side, he couldn't understand why sometimes Strouds dealt with small companies for only a few skus, instead of consolidating them from one larger resource. Now he gets it.

"Newness for newness sake is not enough — it needs to be the right product for our customer," he said. Valone added that Strouds will not shrink its vendor base.